HAROLD PERRY vs. GOODWILL FO THE SAN FRANCISCO BAY

Discussion

I. FAA Applies

The FAA (9 U.S.C. §§ 1-14) governs contractual arbitration in written contracts involving interstate or foreign commerce or maritime transactions. (9 U.S.C. §§ 1, 2.) “The ‘principal purpose’ of the FAA is to ‘ensur[e] that private arbitration agreements are enforced according to their terms.’ ” (Lacayo v. Catalina Restaurant Group Inc. (2019) 38 Cal.App.5th 244, 257 [citing AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 344].) The parties may elect to apply the FAA, even if there is no interstate commerce. (Victrola 89, LLC v. Jaman Properties 8, LLC (2020) 46 Cal.App.5th 337, 355.)

Here, Goodwill provides a declaration that it is involved in interstate commerce. (Decl. of Sydney Robertson (“Robertson Decl.”), ¶ 2.) Furthermore, the Agreement adopts the FAA: “interpretation, enforcement, and proceedings under this Agreement shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et. seq. (“FAA”).” (Id., at Ex. A.) The FAA applies.

II. Existence and Authentication of Agreement

Arbitration – whether under the California Arbitration Act (“CAA”) or FAA – “is a matter of consent, not coercion ... a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [internal quotations and citations omitted].) The existence of a valid agreement to arbitrate is a “question of arbitrability” to be decided by the court unless the parties expressly agree otherwise. (Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83.)

The party seeking to arbitrate must prove the existence of the agreement. (Pinnacle, supra, 55 Cal.4th at 236.) If it does so, the burden shifts to the party opposing arbitration to “demonstrate that an arbitration provision cannot be interpreted to require arbitration of the dispute” or that the agreement is otherwise unenforceable. (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686-87.)

In its moving papers, Defendant demonstrates that the Agreement was electronically signed by Plaintiff on October 20, 2025, and is governed by the FAA. (Robertson Decl., ¶ 2, Exh. A.) In opposition, Plaintiff does not dispute the existence of the Agreement or that he electronically signed it. The burden thus shifts to Plaintiff to demonstrate that the agreement is unenforceable.

III. Delegation

Under the FAA, the enforceability of an arbitration agreement is ordinarily to be determined by the court. That parties may agree in the arbitration provision, however, that the enforceability issue will be delegated to the arbitrator. (E.g., AT&T Technologies v. Communications Workers (1986) 475 U.S. 643, 649.) To establish this exception, it must be shown by “clear and unmistakable” evidence that the parties intended to delegate the issue to the arbitrator. (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944; see Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 68-69, fn. 1 [“‘[u]nless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator’”]; AT&T, supra, 475 U.S. at p. 649.)

Here, Goodwill there is a delegation clause which states: “the arbitrator shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this agreement including, but not limited to, any claim that all or any part of this agreement is void or voidable.” (Robertson Decl. Ex. A.) However, as Plaintiff argues, at the severability clause, the Agreement states: “Any dispute over the formation, enforceability, validity, or severability of any provision of this Agreement shall be resolved by a court of competent jurisdiction.

If any portion of this Agreement is adjudged to be void or otherwise unenforceable, in whole or in part, such adjudication shall not affect the validity of the remainder of this Agreement.” Goodwill does not address Plaintiff’s argument regarding this ambiguity in reply. The language does not meet the “clear and unmistakable” evidence test and as such the Court shall address enforceability.

II. Unconscionability

While California and federal law favor the enforcement of valid arbitration agreements, courts will not enforce an arbitration agreement that is unconscionable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 96-99.) The prevailing view is that for a court to refuse to enforce a contract due to unconscionability, each of two types of unconscionability must be present, but not necessarily to the same degree. (Id. at 114.) “Procedural unconscionability pertains to the making of the agreement; it focuses on the oppression that arises from unequal bargaining power and the surprise to the weaker party that results from hidden terms or the lack of informed choice.” (Ajamian v.

CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 793.) “Substantive unconscionability arises when a contract imposes unduly harsh, oppressive, or one-sided terms.” (Id. at p. 795.) “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz, supra, 24 Cal.4th 83, 114.)

A. Procedural Unconscionability

The Agreement is an adhesion contract, or “a standardized contract which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” (Neal v. State Farm Ins. Companies (1961) 188 Cal.App.2d 690, 694.) The adhesive nature of a contract is sufficient to establish “a minimal degree of procedural unconscionability.” (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 586.) However, the fact that the arbitration agreement is an adhesion contract does not render it automatically unenforceable as unconscionable. (Carlson v.

Home Team Pest Def., Inc. (2015) 239 Cal.App.4th 619, 631.) Instead, to determine whether an arbitration agreement satisfies the “procedural element of unconscionability,” courts focus on “two factors: oppression and surprise.” (Ibid.) “Oppression” arises from an inequality of bargaining power which results in no real negotiation and “an absence of meaningful choice.” (Ibid.) “Surprise” involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms. (Ibid.)

Plaintiff states he was told to download and sign in the Paylocity application on his own personal cell phone and to complete the onboarding documents there. (Decl. of Harold Perry (“Perry Decl.”) ¶ 7.) Plaintiff scrolled quickly through the documents on his phone screen and signed where he was directed to sign. (Id. ¶¶ 10-12.) Modern employees routinely transact business via mobile devices, and cell phone execution alone does not establish oppression absent evidence that the format was inadequate or deceptive.

The record contains no evidence that Plaintiff’s phone screen was objectively too small to display the agreement legibly or that Paylocity’s mobile interface was incompatible with mobile viewing. Plaintiff states he moved quickly and did not read the documents carefully. The compressed timeline reflects Plaintiff's voluntary choice. (See Brookwood v. Bank of Am. (1996) 45 Cal.App.4th 1667, 1674 [“A party cannot use his own lack of diligence to avoid an arbitration agreement”.]

For the foregoing reasons, Plaintiff’s evidence of oppression and surprise establishes a modest degree of procedural unconscionability. Nevertheless, “procedural unconscionability alone does not invalidate a contract.” (Nelson v. Dual Diagnosis Treatment Ctr., Inc. (2022) 77 Cal.App.5th 643, 662.)

B. Substantive Unconscionability

“Substantive unconscionability” addresses the fairness of the term in dispute; substantive unconscionability traditionally involves contract terms that are so one-sided as to shock the conscience, or that impose harsh or oppressive terms. (Brown v. Wells Fargo Bank, N.A. (2008) 168 Cal.App.4th 938, 956.)

Plaintiff’s primary argument for substantive unconscionability is that the Agreement is an “infinite agreement” under Cook v. University of Southern California (2024) 102 Cal.App.5th 312. In Cook, the Second District deemed the University of Southern California’s standard employee arbitration agreement unenforceable due to unconscionability. The court’s ruling was based on three factors. First, the arbitration agreement embraced all claims that the employee and USC might have against each other, including those having nothing to do with the employment relationship. (102 Cal.App.5th 312, 322.)

Second, the agreement survived indefinitely. (Id. at p. 326.) This indefinite duration, coupled with the all-encompassing scope of the agreement, meant that “ ‘for the rest of her life, if [the employee] were to suffer an injury related to USC or its related entities, [she] could be ordered to arbitrate such claims.’ ” (Id. at p. 318 [quoting the trial court’s ruling].) For example, “if she was ‘the victim of a botched surgery in a USC hospital in 15 years, her claims could be subject to the arbitration agreement.’ ” (Ibid.)

Finally, the agreement lacked mutuality because it required the employee to arbitrate her claims “against USC ‘or any of its related entities, . . . or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise[,]’ ” but did not require USC’s related entities to arbitrate their claims against the employee. (Id. at p. 326.) It thus “provid[ed] a significant benefit to USC’s related entities without any reciprocal benefit to [the employee].” (Id. at p. 328.)

In Ayala-Ventura v. Superior Court (2026) 119 Cal.App.5th 241, the Fifth District confronted an employee arbitration agreement very similar to that in Cook. The court stated that even if the agreement did endure indefinitely and embrace any claim the employee might have against the employer, even claims completely unrelated to the employment relationship, those factors did not make it unconscionable under the circumstances presented. According to the Fifth District, “[t]he agreement in Cook was unconscionable in part because of the multifarious ways in which a claim against USC ‘completely unrelated to [Cook’s] employment’ could arise.” (Id. at p. 257.)

Given “the well-known, broad capacity of USC’s reach[,] Cook could be subject to the arbitration agreement forever in any manner of ways including not just a botched surgery but an injury while attending a USC football game in 15 years.” (Id. at p. 258.) By contrast, the defendant employer in Ayala-Ventura was a provider of commercial janitorial services and so, by its nature, did not generate litigation opportunities in a number or variety approaching an entity like USC. (Id. at pp. 258-258.)

Regarding the third factor identified in Cook, mutuality, the Ayala-Ventura court was simply untroubled by the fact that the agreement required the employee to arbitrate her claims against the employer’s other employees and agents, but not vice versa. It did not consider this to count toward a finding of unconscionability. (Id. at p. 259.)

Applying Cook and Ayala-Ventura to the facts presented, the Court concludes that the Agreement is not an unenforceable infinite agreement. The Agreement provides that both Goodwill and Plaintiff: “mutually agree to the resolution by arbitration of all claims or controversies relating to pre-employment, employment, and post-employment conduct, including but not limited to separation and/or termination of employment, that the Company may have against Employee, or Employee may have against the Company, its officers, directors, employees, or agents, the Company’s parent, subsidiary, and affiliated entities, the Company’s benefit plans or the plans’ sponsors, fiduciaries, administrators, affiliates and agents, and/or all successors and assigns of any of them, and/or the Company’s client(s) (“Covered Disputes”).”

Plaintiff argues the Agreement requires arbitration of disputes that have nothing to do with Plaintiff’s employment. Defendant argues the Agreement read reasonably and confirms that the Agreement is directed at employment-related claims, including disputes arising before employment, during employment, and following separation. Construing the Agreement in a manner that avoids unconscionability, the Court interprets the Agreement as applying to only employment-related claims. (Ayala-Ventura, supra, 119 Cal.App.5th at 255-256.) Given this interpretation, the Agreement is self-limiting in time as it only applies to employment related claims. Once the employment ends, no further facts giving rise to claims can develop.

Moreover, the Agreement requires both Goodwill and Plaintiff to arbitrate their clams. Plaintiff argues the Agreement requires Plaintiff to arbitrate against multiple third parties that are not named. Cook explicitly acknowledged that an arbitration agreement “cannot be unconscionable simply because it provides benefits to third parties.” (Cook, supra, 102 Cal.App.5th at 348.) Accordingly, the Court does not find substantive unconscionability on mutuality grounds.

Plaintiff has demonstrated some degree of procedural unconscionability inherent in any adhesive contract. As a result, he needed a very compelling showing of substantive unconscionability to have the Agreement deemed unenforceable on unconscionability grounds. (See Armendariz, supra, 24 Cal.4th 83, 114 [discussing this sliding-scale approach].) He has not made one.

III. Class Claims

Where the FAA applies, it preempts state law rules limiting the enforceability of class and representative action waivers in arbitration agreements. (See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 366 [overruled in part by Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 662].) Such waivers are enforced according to their terms.

The Agreement states that “To the maximum extent permitted by law, Employee hereby waives any right to bring on behalf of persons other than Employee, or to otherwise participate with others in, any class, collective or representative action, or other federal, state or local statute or ordinance of similar effect in federal or state court.

Employee, however, retains the right to bring said claims in arbitration, including those claims under the California Private Attorneys General Act (“PAGA”), on an individual basis, should they so desire.” (Robertson Decl., Exh. A.) As a result, his class action claims are properly dismissed.

The Motion to Compel Arbitration is therefore GRANTED; the class claims DISMISSED, and this action is STAYED pending the outcome of that arbitration.

Parties must comply with Marin County Superior Court Local Rules, Rule 2.10(A), (B), which provides that if a party wants to present oral argument, the party must contact the Court at (415) 444- 7046 and all opposing parties by 4:00 p.m. the court day preceding the scheduled hearing. Notice may be by telephone or in person to all other parties that argument is being requested (i.e., it is not necessary to speak with counsel or parties directly.) Unless the Court and all parties have been notified of a request to present oral argument, no oral argument will be permitted except by order of the Court. In the event no party requests oral argument in accordance with Rule 2.10(B), the tentative ruling shall become the order of the court.

IT IS ORDERED that evidentiary hearings shall be in-person in Department L. For routine appearances, the parties may access Department L for video conference via a link on the court website. Kindly turn your camera on when your case is called and make sure the party or lawyer making the appearance is properly identified on the screen.

FURTHER ORDERED that the parties are responsible for ensuring that they have a good connection and that they are available for the hearing while using the virtual remote courtroom. If the connection is inadequate, the Court may proceed with the hearing in the party’s absence. If it is determined that you are driving your car during the hearing, you will be removed from the virtual courtroom. (Yes, this happens).